Analyze the deal

When looking at properties you should be able to decide within a few minutes if the asking price of the property works with the rental income available.You'll want to make sure you are familiar with the area.

Some common expenses that go along with owning a rental property are the following:

*Insurance costs

*Property Tax (Easily obtainable information)

*Electricity (Can sometimes be placed in tenants name)

*Natural Gas (Can sometimes be placed in tenants name)

*Water/Sewer (Can sometimes be placed in tenants name)

*Legal fees

*Vacancy ( Account for one month vacancy )

*Repairs

Lets take an example :

Single family home for sale

Asking price $424,000

In a great neighbourhood where the rents are high. Stable community.

Projected rental income : $2000 / month (Lets say tenants will pay utilities)

Analyze this deal:

$424,000 asking price

Lets look at the downpayment

20% of 424,000 = $84,800

*We need $84,800 to put down on this property*

Total mortgage will be $339,200 with a bi-weekly payment of $722.00 (@ 2.8% interest)
***Note: Using a Monthly mortgage would be $1571.00 vs $1444.00 on a bi-weekly payment***

Rental income:

$2000/mth

Right away you should take your rental income $2000 minus (-) your mortgage $1444 = $556.00

*Note that you have $556.00 to pay your expenses that come with owning the house... yes the tenants are going to pay the utilities (Natural gas, Hydro (Electrical), Water&Sewer, Internet/TV)
You will have to pay the insurance (Estimate $120/mth), the taxes (You will be given the exact number, for this lets assume a realistic $4450/year), and of course any maintenance costs (breakdowns, etc.) We won't account for any vacancies in this calculation.

$2000-1444= $556 -120 - (4450/12) 370.83 = $65.17 positive cash flow per month

Let's hope that you don't have to change any light bulbs... you just might not break even that month.

Example 2: (Simplified version)

Asking price $529,000

Triplex: Fully rented , Total rent $4200/mth

Downpayment: 20% = $105,800

Mortgage cost $423,800

Bi-weekly payment: $901.00

Rent-Mortgage payment = $2398.00

* Tenants are all inclusive but pay their own cable and internet bills*

Electricity for the month - $280

Water for the month - $125

Natural Gas for the month (avg) - $75.00

Monthly insurance - $139

Monthly Taxes - $283.30

Total expenses - 902.30

3299-902.30= $1495.70 positive cash flow

Here, you can see that by quickly analyzing two different properties that are for sale allows you to narrow down on which one is the better purchase with regards to cash flow.

A triplex might not be as easy to sell as a single family home when it comes time to cash out and retire. These are all personal preferences when it comes to real estate investing.